Tax credit on solar technologies denied, appeal against decision

February 17, 2013

MARTINSBURG - Area individuals and businesses alike thought they would get a tax credit for their use of solar technologies in 2011; however, many were confused when they were denied the credit upon filing.

According to Senate Bill 465, a piece of legislation that took effect July 1, 2011, a tax credit would be allowed for alternative-fuel motor vehicles and qualified alternative fuel vehicle refueling infrastructure. The legislation's definition of "alternative fuel" includes "electricity, including electricity from solar energy."

The West Virginia State Tax Department ruled in October, however, that solar would not be included under the SB465 credits, according to John Christensen of Mountain View Solar, a Berkeley Springs-based solar installation company.

While no one is suing the tax department, there are several people involved in an appeals process, Christensen said.

David Levine, of solar analytics company Geostellar, said the tax department "has been somewhat arbitrary and capricious in accepting and denying individual claims for the tax credit."

Funded by a grant from the Department of Energy, Geostellar has engaged Deloitte - a national tax accounting firm - to gather information and provide advice on the issue.

"We've found cases where the tax credit has gone through, we've seen cases in which the people have been asked to pay back taxes," Levine said. "There doesn't seem to be any distinction between the two."

Levine said Deloitte advised Geostellar to approach the issue through the state's Deparment of Revenue as well.

"It doesn't really need, at this point apparently, an action on the part of the state court system," Levine said.

A community effort to challenge the ruling has also been established. Sustainable Shepherdstown, a local environmental organization, is circulating an online petition that asks Gov. Earl Ray Tomblin to instruct the tax department to include solar energy in SB465.

"I'm impressed by how fast this petition has spread across the state," said volunteer Than Hitt of the petition's more than 800 signatures. "I think this is just the tip of the iceberg."

The petition also asks that corrective legislation be established to include solar energy in state tax incentives and, maybe more importantly, that a "safe harbor" be provided for those who already applied for the tax credit.

"That's the most important thing out of all of us, because we were led to believe there was a tax credit coming," Christensen said.

Those affected by the tax department's ruling would take a large financial hit if they were made to pay back taxes. The legislation designated credit of up to $25,000 for vehicles and more than $300,000 for fueling stations between Jan. 1, 2011 and Dec. 31, 2013.

"That put us in a tough position, because we have a lot of (clients) that are on the hook for that money," Christensen said. "They were expecting tax credits, and now the tax department is expecting them to pay up."

Stephen Lee, director of the Office of Tax Appeals, said he could not offer any information regarding the appeal.

"Everything that's handled in this office is confidential," Lee said. "I can't acknowledge whether we have a case or not."

Hitt said he sees the potential tax credit as a positive step toward increasing West Virginia's solar potential.

"When you look at the places with the strongest economies, you see that those are the places that provide incentives for people to produce and to use solar power," Hitt said. "I think West Virginia should do the same."